Sanchayita Lahkar

The High Court of Kerala has upheld the Debts Recovery Tribunal-I, decision setting aside an order passed by the Chief Judicial Magistrate (CJM), Manjeri, under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), on the ground that the order was passed without application of mind and using a printed format. The Single Bench of Justice Gopinath P. recorded that “the act of the Magistrate in passing orders in printed form by filling in necessary details in blank spaces cannot be justified under any circumstances.”

The petitioners, a banking company and its Authorised Officer, invoked Article 227 of the Constitution of India, challenging the Tribunal’s order dated 01.08.2024, passed in S.A.No.286/2024. The Tribunal had set aside the order of the CJM, Manjeri in M.C.No.929/2023, which was rendered under Section 14 of the SARFAESI Act for taking possession of a secured asset.

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The bank contended that the Tribunal’s interference was unwarranted as the Magistrate’s role under Section 14 is limited to providing administrative assistance to the secured creditor. It was submitted that, “while exercising powers under Section 14 of the SARFAESI Act, the Chief Judicial Magistrate only exercises an administrative power as it is clear from a reading of the provisions of Section 14 of the SARFAESI Act that the duty of the learned Magistrate is only to assist the secured creditor in taking possession of the secured asset.”

In support of its position, the petitioners referred to judgments of the Supreme Court, including Indian Bank v. D. Visalakshi (2019) 20 SCC 47, R.D. Jain & Co. v. Capital First Ltd. (2023) 1 SCC 675, and Balkrishna Rama Tarle v. Phoenix ARC (P) Ltd. (2023) 1 SCC 662. The petitioners also cited Canara Bank Ltd. v. Stephen John and others; 2018 (3) KHC 670, arguing that the Magistrate’s role under Section 14 is ministerial and non-adjudicatory. It was asserted that the Tribunal erred by interfering solely because the order was rendered in a printed format.

The respondent, Jahfer M., who had initiated proceedings before the Tribunal by filing S.A.No.286/2024, defended the Tribunal’s order. The respondent’s counsel submitted that there was no jurisdictional error in the Tribunal’s action, arguing that the Magistrate must still exercise a judicial approach when processing Section 14 applications. Referring to the same precedent in Visalakshi (supra) and Sama Rubbers v. South Indian Bank Ltd.; 2023 KLT OnLine 1955, the respondent maintained that the Magistrate cannot adopt a mechanical or casual approach.

It was further argued that, “when faced with an application under Section 14 of the SARFAESI Act, the learned Magistrate is not expected to adjudicate any lis, the learned Magistrate ought to satisfy himself that all the conditions for the exercise of the power under Section 14 of the SARFAESI Act have been satisfied in the particular case before him.” Counsel also referred to Jimmy Thomas v. Indian Bank; 2023 (3) KLT 630, submitting that this Court had previously disapproved the practice of Tribunals relying on “cut, copy, paste” methods in securitisation proceedings, contending that the same logic applies to Magistrates issuing orders in printed formats.

Justice Gopinath P. recorded that while the Magistrate’s function under Section 14 does not involve adjudication, “the proceedings must reflect application of mind.” The Court noted that the Tribunal was correct in holding that the Magistrate’s reliance on a printed format without adequate scrutiny contravened the requirements of the SARFAESI framework.

Citing Visalakshi (supra), the Court observed, “the authority must display judicious approach, in considering the relevant factual position asserted by the parties. That presupposes that it is a quasi-judicial inquiry though, a non-judicial process.” The judgment further noted, “the inquiry does not result in adjudication of inter se rights of the parties in respect of the subject property or of the fact that the transaction is a fraudulent one or otherwise.”

The Court referred the principles set out in R.D. Jain & Co. (supra) and recorded, “while disposing of the application under Section 14 of the Sarfaesi Act, no element of quasi-judicial function or application of mind would require. The Magistrate has to adjudicate and decide the correctness of the information given in the application and nothing more.” However, the Court maintained that this limited verification still mandates the Magistrate to actively consider whether the conditions precedent under Section 14 have been fulfilled.

The Bench also cited Balakrishna Rama Tarle (supra), noting that “once all the requirements under Section 14 of the Sarfaesi Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner.”

The Court observed that the authority’s responsibility is to ensure the procedural compliance before issuing orders with significant consequences under Section 14, recording that, “it cannot be forgotten that the power under Section 14 of the SARFAESI Act involves drastic consequences and that is why the Parliament conferred the power to take action under Section 14 of the SARFAESI Act on high officials such as District Magistrate or the Chief Judicial Magistrate.”

Relying on Sama Rubbers (supra), the Court further noted, “the authority must display a judicial approach in considering the relevant facts asserted by the parties. It is a quasi-judicial inquiry through a non-judicial process.”

The Court found that the Tribunal’s interference was appropriate given that the CJM’s order did not reflect this standard and was based on a generic printed format.

Concluding the matter, the Court dismissed the original petition and recorded, “the Original Petition fails and it is accordingly dismissed making it clear that this will not prevent the petitioners from applying for or obtaining fresh orders under Section 14 of the SARFAESI Act from the competent Court.”

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Additionally, the Court directed, “the Registry shall communicate a copy of this judgment to the Chief Judicial Magistrate who issued the order on M.C.No.929/2023.”

The Court issued a strong caution regarding procedural conduct by recording that, “the practice of passing orders in the manner noticed in this judgment is strongly deprecated.”

Advocates Representing the Parties

Advocates for Petitioners: K.K. Chandran Pillai, Senior Advocate and P.A. Augustine, Advocate.

Advocates for Respondent: V. Philip Mathews, Advocate and Athulya Sebastian, Advocate

Case Title: The South Indian Bank Ltd. and Another vs. Jahfer M.

Neutral Citation: 2025:KER:24644

Case Number: O.P.(DRT) No. 336/2024

Bench: Justice Gopinath P.

[Read/Download order]